April 13, 2009

Your letter of April 13, 2009 requests our assurance that we would not recommend that the Securities and Exchange Commission (the "Commission") take any enforcement action under Section 2(a)(41) of the Investment Company Act of 1940 (the "Act"), and rules 2a 4 and 22c 1 thereunder, if the College Retirement Equities Fund ("CREF"), a registered open-end management investment company under the Act, values the securities in its Money Market Account portfolio (the "Money Market Account" or "Account") using the amortized cost method under rule 2a 7 under the Act if the Money Market Account operates in accordance with rule 2a 7 but does not maintain a stable price per share at a single value.1

You state that CREF issues variable annuity certificates that are funded by eight portfolios, one of which is the Money Market Account.2 You state that the Money Market Account is, and holds itself out as, a money market fund within the definition of rule 2a 7(b) and that the Money Market Account complies with the risk limiting requirements of rule 2a 7(c)(2), (c)(3), and (c)(4) and all other applicable requirements of the rule.3 Unlike most money market funds, the Money Market Account does not make distributions of income, and therefore does not maintain a stable net asset value. In addition, unlike most money market funds, the Money Market Account does not use the amortized cost method to price its portfolio securities with a remaining maturity of more than 60 days.4

CREF has determined that it would be in the best interests of the Account and CREF participants investing in the Account to begin using the amortized cost method to value all of the Money Market Account's portfolio securities. CREF is concerned, however, because it believes that two provisions of rule 2a 7 could be read to limit use of the amortized cost method to money market funds that maintain a constant price per share at a single value. First, rule 2a 7(c)(1) states that a money market fund may use the amortized cost method, if the board of directors determines, in good faith, that it is in the best interests of the fund and its shareholders to maintain a stable net asset value per share or stable price per share, by virtue of the amortized cost method, and that the fund will continue to use such method only so long as the board believes that it fairly reflects the market-based net asset value per share. Second, rule 2a 7(c)(7)(i) provides that the fund's board shall establish written procedures reasonably designed, taking into account current market conditions and the fund's investment objectives, to stabilize the money market fund's net asset value per share at a single value.

You state that there is no fundamental policy reason that the use of the amortized cost method by a money market fund should be tied to maintenance of a single value per share. You represent that before implementing the amortized cost method, CREF's board of directors (none of whom is an "interested person" as that term is defined in section 2(a)(19) of the Act) instead will have determined that it is in the best interests of the Account and its beneficial owners for the Account to provide additional stability in the Account's price per share by using the amortized cost method and complying with the requirements of rule 2a 7, except that the Account would not maintain a stable net asset value at a single value. You also state that CREF's board of directors will adopt written procedures reasonably designed to provide stability in the Account's price per share. The procedures will include all of those required by rule 2a 7(c)(7) for funds using the amortized cost method other than procedures designed to enable the Account to maintain a stable net asset value at a single value. In addition, CREF's prospectus will make clear that the Account does not maintain a constant value per share, and that the value will fluctuate. You maintain that by complying with all of the requirements of rule 2a 7 other than maintaining a stable share price, CREF will provide investors in the Account with all of the protections against dilution that rule 2a 7 provides for money market funds that maintain a constant share price.

Based on the facts and representations contained above and in your letter, we will not recommend enforcement action to the Securities and Exchange Commission against the Account under section 2(a)(41) of the Act and rules 2a 4 and 22c 1 thereunder if the Account uses the amortized cost method to value all of its portfolio securities. Because our position is based on the facts and representations above and in your letter, you should note that any different facts or representations may require a different conclusion. This response expresses our views on enforcement action only and does not express any legal conclusions on the issues presented.

Very truly yours,

Adam B. Glazer
Senior Counsel

Endnotes

1 For purposes of this letter, the term "share" means an accumulation unit issued by CREF.

2 Unlike most variable annuity issuers, which are structured as "two-tiered" entities with a unit investment trust separate account investing in underlying mutual funds, CREF is a single tier entity that both issues the annuities and holds and manages its investment portfolios directly.

3 Some of the provisions of rule 2a 7 apply only if a fund uses the amortized cost method, and thus are not applicable to CREF at present.

4 Section 2(a)(41) of the Act (15 U.S.C. 80a 2(a)(41)) and rule 2a 4 thereunder (17 CFR 270.2a 4) generally require registered investment companies, including money market funds, to value their portfolio securities for which market quotations are readily available at the market value and for securities for which market quotations are not readily available at fair value as determined in good faith by the board of directors. The Money Market Account uses the amortized cost method to price its portfolio securities with a maturity of 60 days or less in accordance with Commission guidance. See Valuation of Debt Instruments by Money Market Funds and Certain Other Open-End Investment Companies, Investment Company Act Release No. 9786 (May 31, 1977).